Answer:
Moonscape
The flotation costs as a fraction of funds raised is:
= 0.04
Explanation:
a) Data and Calculations:
Number of shares issued = 3,000,000 shares
Offer price per share = $10
Underwriting spread per share = $0.50
Closing price at first day of trading = $15.00
Legal, administrative, and other costs = $300,000
Amount of funds raised from the issue = $45,000,000 (3,000,000 * $15)
Underwriting cost = $1,500,000 ($0.50 * 3,000,000)
Total flotation cost = $1,800,000 ($300,000 + $1,500,000)
Flotation costs as a fraction of funds raised = $1,500,000/$45,000,000
= 0.04
= 4%
